What is one disadvantage of NPV as a capital budget method? It does not deliver an...
- It does not deliver an overall picture of the gain or loss of implementing a project.
- It can be misleading if inputs like cash flow turn out to be wrong.
- It is rarely used, so there is disagreement as to what an adequate NPV is.
- It cannot be used to compare investments with different upfront costs.
Homework Answers
Correct choice B
The main ingredient of NPV is forecasted cash flows. If the forecasted cash flows turns out to be incorrect then the NPV can be misleading
It delivers an overall picture of gain/loss of implementing a project
NPV is most commonly used method for evaluating project
NOV can be used to compare investment with different upfront costs
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